The Robots Are Coming

Technology is now unquestionably being used to replace human labor.

I have written many columns about technology destroying jobs. My main goal is to give subscribers a well-grounded set of guidelines that they could use to evaluate the issue as it began to be discussed by the media. That time has arrived and it presents an opportunity to review what some prominent people have recently stated.

Technology is now unquestionably being used to replace human labor faster than new uses for human labor are being created by it. The principal debate among the people most knowledgeable on the subject is whether this is a temporary or permanent phenomenon. If it is temporary, how long it will last and what impact it will have on the economy, financial markets, politics, government and everything else?

If it is permanent, and there is mounting evidence that it is, then the ramifications are extraordinary. I have previously covered the ramifications, so I have provided some URLs to the appropriate columns in the comments section below.

In this column, I will critique some of the most prominent recent articles and people discussing the issue. First, billionaire tech investor, Nick Hanauer, recently addressed the issue in a special report for Politico, The Pitchforks Are Coming... For Us Plutocrats.

Hanauer addresses the issue by observing that increasing returns to capital vs. labor have created income and wealth inequality in the U.S. He suggests that the corrective measure is increasing the minimum wage. He seems to be unaware of the fact that the returns he's been able to achieve are the direct result of the destruction in jobs caused by the technology he has invested in.

There have to be jobs for human beings in order for an increase in the minimum wage to have even a temporary countercyclical impact. Doing so will also increase the cost of labor and thereby incentivize the owners of capital to invest even more money in the creation of new technologies to replace human labor. What he gets right is that unless something is done to reverse the ongoing trajectory of income and wealth concentration it will eventually lead to social unrest, civic disobedience, and revolution.

Andreessen makes several good points about advancing technology freeing up time for people to do other things. But he assumes those "other things" for most are both compatible with income creation and the consumer driven economy as a result. For those whose skill sets are not economically viable he proposes: "Create and sustain a vigorous social safety net so that people are not stranded and unable to provide for their families."

In this he is hinting at the creation of a guaranteed basic income provided by the government but is seemingly, simultaneously unaware of how many people are increasingly being included in that potential group.

Third, Google (GOOGL) co-founders Larry Page and Sergey Brin recently addressed the issue of job destruction at the KV CEO Summit. As Andreessen noted in his piece, Brin and Page also dismiss fears of job destruction caused by technology today as being similar to the fears expressed by the Luddites during the industrial revolution of the 19th century. They note that people moved from farms to factories and jobs were created.

What's most interesting about their publicly stated position is that it is contrary to that of Google's Director of Engineering, Ray Kurzweil, who believes that robots and artificial intelligence will have the capabilities to allow it to replace human labor completely within 15 years. Now that this issue has become a part of the social consciousness, it will increasingly become a part of the political narrative, with the subject matter corrupted by the agenda driven media in the process.

The most important issue from the discussions referenced above and many others is that nobody I am aware of has yet considered that on the current trajectory of job destruction, the U.S. economic system will cease to be viable within as little as 10 years because consumers will simply not have the income to sustain it.

Currently about 30% of the U.S. population is employed full-time in the private sector. On the current trajectory, that will decline to 25% within 10 years, and 20% within 20 years. Below 25%, the consumer driven U.S. economic structure is no longer sustainable or viable.

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At the time of publication, Arnold had no positions in the stocks mentioned.

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